Archive for October, 2012

When I was in Beijing in early September, the European Union announced a trade investigation against China for selling Solar Panels for less than the cost of manufacture. While the EU continues to seek to determine if in fact China “dumped” solar panels, the news reports (on the one English-speaking channel on the hotel TV) spent over 40 minutes discussing the negative impact on the already-slowing solar panel industry should the EU claims be true.

About 10 days later, the US decided to file a trade complaint with the World Trade Organization over China’s subsidized auto and auto parts exports. However, the Chinese attacked first by filing a complaint with the WTO over unfair duties the US has enacted on 30 different imports from China, including steel, paper and kitchen appliances. These accusations of subsidizing manufacturing and dumping export products is all part of tit-for-tat disputes which has been ratcheting up in recent years over the Chinese attitude which fails to protect US intellectual property. Despite a win in the Chinese courts by Ford Motor Company during the Summer of 2012, it is routine for the Chinese manufacturers to copy American-made goods, especially films and videos.

Then, at the end of September, headlines announced what was predicted and almost visible while I was in China — Chinese economic growth slowed for the 11th straight month. Granted, the economy is still growing (at what from a US perspective is) a health rate of 8.9% (as of August 2012), but is substantially down from a year earlier when the growth rate was 13.5%.

The slowing of manufacturing and economic growth in China will have implications far beyond the Chinese borders. Chinese growth requires inputs of commodities from around the world — countries like Brazil, Australia, South Africa, Russia, Venezuela and even the US are exporters of raw materials to China. At an anticipated Chinese growth rate of 6 to 7%, countries and companies around the world will need to adapt to a “new normal” (and lower) level of raw material exports to China.

It used to be said that when the US sneezes, the world catches a cold. The Chinese appear to be getting a bug which is giving the world influenza.

A 12-hour time difference (after 16 hours on a plane) really does wreak havoc on a sleep schedule. “Jet Lag” most often results from a high-speed trip through multiple time zones. Duh! The symptoms include fatigue, inability to concentrate, feeling disoriented or out-of-sync and headaches — none of which you want to have to deal with when trying to conduct BUSINESS after that “high speed trip through multiple time zones.”

Is it avoidable? Not really, but it can be partially managed (at least I’ve TRIED to manage). I haven’t been one to go the prescription drug route when travelling, but I find a glass of wine and two Advil PM help me fall asleep on long plane flights — and discovered they are only somewhat useful when trying to get back on “sleep schedule” either during or after a long “high speed trip through multiple time zones.” What do others recommend?

Prepare for the time change: I remember my father trying to do this as he prepared for a business trip from Southern California to Boston — each night trying to go to sleep one hour earlier and wake up one hour earlier until he was on Boston time for a few days before the trip. Might work for a 3-hour time difference, but a 12-hour time difference?

Anticipate the time change: I always set my watch to the new time zone the moment I step on the plane (going half way around the world, I didn’t have to touch my watch!). Then, on the plane, “act” like you’re in the new time zone. The experts also say to avoid caffeine and alcohol on the flight, but I stick to my red wine and Advil concoction for falling asleep.

When you arrive, stay awake if it’s daytime there, and get into the sunshine. Exercise, but don’t overdo it. Take only a short nap (before 2 pm local time and sleep no more than one hour). Go to sleep and wake up on time, local time — and if you can’t manage sleep, still get out bed on time!

How did I do with the 12-hour time change twice in two weeks? I adjusted right away. . . the first night. Then I was wide awake for the next two nights while in China, before I resorted to the Advil PM. Arriving home, I was smarter (or more experienced). Advil PM for the first two nights and I was right back on local time without too much fatigue. The headaches I’m chalking up to something besides jet lag — a huge tax filing deadline on September 17th.

When I was in grade school, I had a social studies project researching (albeit in encyclopedia NOT on the internet) a country and presenting it to the class. I chose Hong Kong and all these years later, all I remember is that the old airport was right on the water in the middle of the city and it was the place on earth with the highest population density.

Hong Kong has been long used by multinational companies as a regional base to manage their businesses in the Asia Pacific, particularly in the Chinese mainland. Based on a government survey in Hong Kong in June 2009, there were 3,580 regional operations of overseas companies in Hong Kong, an increase of 44% from the previous decade. Of these regional operations, 83% have operations related to mainland China. Nowadays, Hong Kong also provides an international gateway for mainland companies wishing to explore financing opportunities, within or outside Asia.

There are many reasons for this success, but probably the main reasons are as follows:

A stable government dedicated to the encouragement of free enterprise and opposed to regulation or intervention unless deemed absolutely essential.

A respected, independent, legal system based on transparent Anglo-Saxon principles.

A free press that is widely-owned, independent, and vocal.

A good blend of entrepreneurial skills and a stable, talented, adaptable and hard-working labor force.

A complete absence of foreign exchange controls and only minor import duties on a small number of items.

Very low levels of taxation by international non-tax haven standards.

No restrictions on foreign investment.

Superb communications and banking facilities.

A location at the geographical center of Asia.

The willingness of its businesses to diversify according to international market demands and react quickly to changing trends.

The complete range of high quality professional services.

Hong Kong is more than just Hong Kong Island and Kowloon. It is a series of XX islands and since July 1, 1997 is a “Special Administrative Region” within China. Having only a morning to “see” Hong Kong, I got only the highlights — beginning with Victoria Peak. The morning was somewhat overcast, so the pictures are hazy and not the brilliant sun and sparkling harbor as in the postcards.

The items in this blog are informational only and are not meant as professional advice. Consult with your tax advisor to determine how any item applies to your situation. Kimberlee Phelan writes Where In the World, and any opinions expressed or implied are not necessarily shared by anyone else at WithumSmith+Brown.

Author

Kimberlee S. Phelan, CPA, MBA, specializes in international tax, concentrating her efforts on special projects involving corporate tax research and planning, as well as inbound and outbound international structuring for corporations and individuals. She is actively involved in Withum’s international affiliation of firms, HLB International, serving as the co-chair of the HLB North America Tax Services Group as well as co-chair of the HLB International Tax Committee.

Having travelled to over 40 countries, Kimberlee will write about her experiences in this blog, highlighting interesting discoveries, tax and accounting law changes, as well as important business and etiquette tips.